Crypto whales holding large numbers of physical bitcoins may be timing big sell-offs to coincide with when their bitcoin futures contracts come due, researchers at Arcane Crypto claim.
Timed or coordinated sell-offs drop the price of bitcoins, allowing the same traders to cheaply deliver on bitcoin futures agreements:
“These futures contracts are optimal for manipulation…The phenomenon suggests market manipulation.”
Bitcoin futures contracts at the CME settle on the last Friday of every month. Arcane studied price changes that occur around this time:
“Arcane Research has… analyzed price trends every month since January 2018. The trend is striking. Bitcoin falls on average 2.27% towards (futures) settlement each month. In comparison, the average on a random day over the same period is hardly negative, with a fall of only 0.06%.”
Adjusted criteria show the same trend:
“If we adjust for large outliers, by looking at the median rather than the average, the trend is even clearer. Then, the average price movement is positive on a randomly selected day, plus 0.04%. If we only look at the period before settlement, however, the price falls by 1.99% on average.”
Arcane also found that bitcoin price movements were positive for 306 out of 608 days, “corresponding to 50.3%.” A similar analysis showed that 9 out of 20 month, “had a positive daily average, corresponding to 45%.”
This is not the case just before futures contracts settle:
“As the graph above shows, only 5 out of 20, or 25%, of the days before the CME settlement were positive. This applies both to pure returns and whether we look at abnormal returns where the average daily return for the current month is deducted.”
As well, bitcoin bull markets show the greatest price drops just before Bitcoin futures settle, says Arcane:
“Oddly enough, it is in good times that the price falls most before settlement. We saw this particularly well this spring. As the table below shows, the bitcoin price has fallen sharply before settling in months where the daily average return has been particularly high, almost 4% at its highest in May.”
These events, Arcane concludes, are not a result of coincidence:
“The figures thus support a hypothesis that the bitcoin price is manipulated in advance of CME settlement.”
“Further analyses are needed…(including) qualitative studies, where you directly contact those who sign and trade the bitcoin futures contracts at CME, could be of great value in order to shed light on the situation.”